Don’t fear the robots, fear the Fed.

March 22nd, 2013

It’s really quite amazing to see the economic fallacies that are trotted out in support of the central banking/fiat money meme. This recent one attempts to blame rising wealth inequality and economic stagnation on the proliferation of robots in manufacturing and automation in general:

The alarm over machines posing a real risk to jobs has been around since at least 1995, when economist Jeremy Rifkin published The End Of Work: The Decline Of The Global Labour Force And The Dawn Of The Post-Market Era.

He argued then that we had arrived at a crossroads in human progress where machines and information technology were displacing huge sections of the workforce. “All sectors of the economy,” he said, “are experiencing technological displacement, forcing millions onto the unemployment rolls.”Humankind has adapted to the march of technology for the past 150 years, creating new jobs to meet new needs. The worry is that we are now at a turning point, where it may be counterproductive.At some point in the future, technological advances may cause demand to dry up – how do you sell that car if consumers don’t have the jobs that give them the means to purchase it?

It’s important to understand a few principles regarding employment: 1) Employment does not equal economic prosperity. 100% employment is easy to achieve, just look at the former Soviet Union. 2) You will never have 100% employment in a maximally productive economy. Companies that produce better products at lower prices will continually displace those which don’t.

It’s a bit surreal to blame advances in productivity for a declining economy. If that were true, the optimum course of action would be to ban all tools and the products that resulted from their use. Man would go back to spending his entire day foraging for enough food in order to survive until the next. This would certainly solve the problem of temporary unemployment caused by a new technology, but it’s easy to see that employment alone does not tell the whole story. Some degree of unemployment is the inevitable result of change and there is only one way to prevent change. It would require the banning of innovation, thinking, choices and ultimately, freedom.

So what really happens when robots displace assembly line workers? Keep in mind Bastiat’s principle: It is not enough to consider the short term effect on a select group – one must also consider the long term effect on society as a whole.

In this case it’s easy to see the short term effect on the workers – they are unemployed. But is that all there is to it? The only reason a robot would replace a human in the first place is if it lowered the total cost of production. In a competitive marketplace this would mean that the prices of goods produced would fall. Consumers would have more money left over to spend on other items. New jobs would be created in other areas to service this increased demand.

Even within the original industry, there are secondary benefits. Who designs and manufactures the robots? Who services and programs them? These are also new jobs that did not exist before – and presumably better paying ones. Ultimately society as a whole benefits from an overall rise in productivity as it lifts the average standard of living.

But the old “machines destroy jobs” fallacy is just the lead-in to the ultimate red herring:

Science is changing the way wealth is created, and inequality is rising as a consequence.

It’s not too difficult to understand that if you grant a select group of individuals the sole legal right to create money out of thin air, they will use that process to enrich themselves. The creation of new money and credit produces no new wealth, it merely devalues existing savings and earnings. The end result is a transfer of wealth from those work for money to those who print it. This is not the product of automation, but of the Federal Reserve and its monopoly on Federal Reserve Notes. In other words, don’t fear the robots, fear the Fed.

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